EBA insist on voluntary guidelines for stablecoins amid concerns from emerging economies

The European Banking Authority (EBA), the banking watchdog of the European Union, has requested that stablecoin issuers adhere to voluntary guidelines to manage risks and safeguard consumers as it released its first set of measures for public consultation to clarify the requirements for issuing a stablecoin under MiCAR. The guidelines also include provisions such as a permanent right of redemption and rules for handling complaints.

With the approval of the framework, the EBA expects a spike in the supply of stablecoins and further recommends firms follow risk management before the mandatory rules are set in. These initial measures are released ahead of the mandatory regulation set to take effect in a year’s time.

Meanwhile, many emerging economies are worried about the potential effects that stablecoins could have on their monetary policies and capital flows. While it is unlikely that stablecoins could entirely replace major currencies like the dollar and euro, they do carry the risk of currency substitution in developing economies. Additionally, the efficiency of tax collection and revenue could be affected.
Most recently, India’s Deputy Governor of the Reserve Bank of India suggested that central bank digital currencies (CBDC) may be a more stable solution for countries to consider.